MILK SHAKE-UP HITS MURRAY GOULBURN

A PROFIT downgrade and a cut in supplier prices has led to a management shake-up at milk processor Murray Goulburn, including the resignation of Gary Helou as managing director.

Net profit for the full year is expected to be between $39 million and $42 million, down from about $63 million predicted in February. The company originally forecast profit of $89 million ahead of listing last July.

Investors in responsible entity MG Unit Trust (ASX:MGC) responded by offloading units in the trust after being locked in a trading halt since Friday.

The MG unit price plunged 34 per cent to $1.40 following this morning's trading update, well down on the high of $2.70 reached in December.

Murray Goulburn says its farmgate milk price of $5.60 per kilogram is no longer feasible, after being slugged by weak dairy commodity prices.

This has been driven by lower than anticipated sales of adult milk powder to China, which had tripled in the six months to the end of last December.

The company's distributable milk pool for FY16 is expected to be $170 million to $220 million lower as a result, leading to a revised farmgate price of $4.75 to $5 per kilogram. This includes a reduction in the price paid to suppliers.

A milk supply support package has been launched to assist supplier cashflows for the remainder of the year. A fixed price will be deducted from supplier milk payments for up to three years.

Murray Goulburn is 'very disappointed' it was unable to generate forecast milk prices and will implement a number of changes to offset challenging conditions.

"The board remains committed to its strategy of shifting MG's product mix from commodity products to higher margin, value-added and ready-to-consume dairy foods and will continue to focus on transforming MG into a first choice dairy foods company," the company says in a statement to the market.

The transition has prompted a senior management reshuffle, with Helou stepping down from the top job as well as a director of MG Unit Trust.

CFO Brad Hingle also announced his resignation following Helou's departure, but will remain with the company to assist with its full-year financial report.